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Income Taxes
6 Months Ended
Mar. 31, 2017
Income Tax Disclosure [Abstract]  
Income Taxes

8. Income Taxes

 

Income tax expense was $1.9 million and $3.4 million for the three and six months ended March 31, 2017, respectively, compared with a $293,000 and $1.7 million for the three and six months ended March 31, 2016, respectively. The effective income tax rate for the six months ended March 31, 2017 was 33.5% compared with 17.7% for the comparable period year-ago. Our effective tax rate is affected by state taxes, permanent differences, and tax credits, including the FICA tip credit. Beginning in the quarter ended December 31, 2016, the Company began utilizing the effective rate method to calculate income taxes during interim periods instead of the full deferred calculation method.

 

The Company or one of its subsidiaries files income tax returns for U.S. federal, and various state and local jurisdictions. The Company is no longer subject to federal, state and local income tax examinations by tax authorities for years before 2013. The Company’s federal income tax returns for the fiscal years ended September 30, 2015, 2014 and 2013 are currently under examination by the Internal Revenue Service.

 

The Company accounts for uncertain tax positions pursuant to ASC Topic 740, Income Taxes. As of March 31, 2017 and September 30, 2016, the liability for uncertain tax positions totaled approximately $231,000 and $1.0 million, respectively, which is included in current liabilities on our condensed consolidated balance sheets. During the three and six months ended March 31, 2017, the Company settled a city tax audit for approximately $0 and $0.6 million, respectively, the amount previously recorded as an uncertain tax position. This settlement did not have an impact on the annual effective tax rate. The Company recognizes interest accrued related to uncertain tax positions in interest expense and penalties in operating expenses.